TCS and TDS for Marketplace Sellers: Complete 2026 Guide

If you sell on Amazon, Flipkart, Meesho, or any other e-commerce marketplace in India, you are subject to TCS (Tax Collected at Source) under GST and TDS (Tax Deducted at Source) under the Income Tax Act. These deductions directly impact your cash flow, tax liability, and compliance obligations. Understanding how they work, what rates apply in 2026, and how to claim credits is essential for every marketplace seller.

TCS Under GST: How It Works

Under Section 52 of the CGST Act, every e-commerce operator is required to collect TCS at the rate of 1% on the net value of taxable supplies made through their platform. This is split as 0.5% CGST and 0.5% SGST for intra-state supplies, or 1% IGST for inter-state supplies. The "net value" is calculated as the aggregate value of taxable supplies minus returns during the month.

The marketplace deducts this TCS from your settlement amount before paying you. For example, if your total taxable sales for a month are Rs 10 lakh, the marketplace deducts Rs 10,000 as TCS. This amount is deposited with the government and reported in the marketplace's GSTR-8 filing. As a seller, you can claim this TCS as a credit in your electronic cash ledger when filing your GSTR-3B.

TDS Under Income Tax: Section 194-O

Section 194-O of the Income Tax Act requires e-commerce operators to deduct TDS at 1% on the gross amount of sales facilitated through their platform. This applies to the total sale consideration, including any commission or fees charged by the marketplace. The TDS is deducted from the payment made to the seller and deposited with the income tax department.

There are important exemptions to note. If you are an individual or HUF seller and your gross sales through the platform are below Rs 5 lakh in a financial year, AND your total income from all sources does not exceed Rs 5 lakh, the marketplace is not required to deduct TDS. However, most sellers with meaningful business volumes will exceed these thresholds. The TDS deducted appears in your Form 26AS and can be claimed as a credit when filing your income tax return.

The Combined Impact on Your Cash Flow

When you add up TCS under GST (1%) and TDS under Income Tax (1%), a total of 2% is deducted from your gross sales before you receive payment. For a seller doing Rs 1 crore annual revenue, this means Rs 2 lakh is locked up with the government at any given time. While these amounts are adjustable against your tax liability, the cash flow impact is real — especially for sellers operating on thin margins in competitive categories.

Proper reconciliation of TCS and TDS is critical. You must verify that the amounts deducted by each marketplace match what they report to the government. Discrepancies between your records, the marketplace reports, and Form 26AS can result in lost tax credits. Multi-channel sellers face an even bigger challenge, as they need to reconcile TCS and TDS across multiple platforms.

Filing and Compliance Requirements

As a marketplace seller, your GST compliance obligations include filing GSTR-1 (outward supplies), GSTR-3B (summary return and tax payment), and annual returns. When filing GSTR-3B, claim your TCS credit by entering the amounts from each marketplace in the relevant section. The credit appears in your electronic cash ledger and can be used to offset your GST liability.

For income tax, the TDS deducted under Section 194-O is reflected in your Form 26AS. When filing your income tax return, claim this TDS as advance tax paid. If the total TDS and advance tax exceed your actual tax liability, you are entitled to a refund. Ensure that your PAN is correctly linked with all marketplace accounts, as any mismatch can prevent TDS credits from appearing in your Form 26AS.

Common Issues and How to Resolve Them

The most frequent issue sellers face is a mismatch between TCS deducted and TCS reflected in GSTR-2A. This happens when the marketplace files their GSTR-8 late or with errors. If you notice a discrepancy, first check the marketplace seller dashboard for their TCS certificate. Then raise a support ticket with the marketplace to correct any reporting errors.

Another common problem is TDS not appearing in Form 26AS. This usually occurs when the marketplace has not filed their TDS return or when there is a PAN mismatch. Contact the marketplace compliance team and provide your correct PAN details. You should check Form 26AS regularly throughout the year — not just at tax filing time — to catch and resolve issues early.